The ‘third unbundling’: Changing the way we do business

The Industrial Revolution marked a major turning point in history, with the unprecedented rate of change impacting on almost every aspect of daily life.

The centuries that followed have been similarly defined by new ways of operating businesses and increasing production to satisfy a rapidly expanding customer base. The constant and staggering rate of change has forced businesses to either accept that they must constantly evolve, or be superseded by more adaptable competition. Many, clearly have not, and only 12.2 per cent of the original Fortune 500 companies from 1955, were left standing in 2014.

But what separates those 61 companies from the 439 that have fallen by the wayside? It could be argued that their success can be traced back to a process called ‘unbundling’, whereby a company breaks down its traditional organisational and operational structures to function more efficiently.

Unbundling: A potted history

The first unbundling process started a few decades ago as a term used in association with the growth of outsourcing business functions. Made possible by reductions in transportation costs, this marked a change in mentality that recognised it wasn’t necessary to make goods in the same place as they would be consumed.

More recently, the cost of communication and coordination came down, causing a second unbundling. Manufacturing stages no longer needed to be performed near to each other, and latterly, the effects of this have spread from factories to offices. This has resulted in the offshoring and outsourcing of tertiary sector jobs, as well as those in the secondary sector.

While the first unbundling enabled the geographical separation of a company from consumers, the second unbundling physically redefined the offices and manufacturing facilities themselves. Indeed, this unbundling of office work fostered greater global competition within individual jobs, rather than between entire organisations, and first became evident in the outsourcing of specific roles such as call centre agents or software developers.

Unbundling now

Right now though, a third unbundling is taking place. In every industry, from entertainment to enterprise, the world’s most innovative businesses are increasingly being led by the desire to serve customers quickly and conveniently, directly through their mobile phones, TVs and wearable devices.

Today, individual jobs, processes and services are being optimised by technology; roles and industries that have historically been impervious to disruption are now being fundamentally altered. Take, for example, the humble taxi driver. As companies such as Uber and Kabbee have demonstrated, the third unbundling is breaking down the notion of the traditional minicab firm by connecting drivers directly with their customers via GPS-equipped devices, thereby cutting out the middle-man.

The result is a simplified, and more convenient user friendly experience, where a driver can be at your door within minutes at the click of a single button.

Silicon Valley: A state of mind

As businesses begin to break down enormous operational structures into smaller, more agile and innovative units, we see the third unbundling reshaping entire industries and how they think about doing business. The concept is heavily rooted in Silicon Valley thinking, where some of today’s leading technology companies have continually asked the question, ‘How can we challenge the big institutions that are forcing us to do things in a certain way?’

The ‘Silicon Valley’ mind-set takes the view that, by using the right people, processes, tools and technologies, it is possible to remake whole industries for the better. The services and suppliers that are unnecessary complicating people’s lives are disassembled and then remade as ‘customer first’ businesses.

But while unbundling stems from the San Francisco Bay Area, it’s not just the leading-edge, innovative technology companies of the world that can benefit from this way of thinking. The Silicon Valley state of mind can be applied anywhere including the biggest businesses in Europe, who can embrace unbundling in order to increase their chances of survival.

Unbundle the business

The companies that are properly embracing digital technology to augment business processes and drive a competitive advantage, are winning. Those who are trying to win through a steadfast reliance on traditional business methodologies and practices aren’t faring so well. More importantly, the longer they try to resist change and maintain the status quo, the more difficult change will be when it becomes unavoidable.

If left too late, it may be impossible. Unbundling on a granular level in the enterprise can help companies to address the problems caused by legacy IT and software systems, which can accumulate over time, stifle innovation, and make it more difficult for developers to do their jobs.

The companies that are meeting the challenges of digitisation and changing customer preferences through unbundling are often relying on open-source, disruptive technologies to support the process. These can be more effectively deployed with the support of third party digital transformation consultants in small teams of no more than four or five people, who have the talent and agility to develop products that millions of people will use every day.

In this way, unbundling from ageing systems can actually enhance a company’s ability to attract and retain talent, because the process supports the developers’ technologies and software of choice, delivering greater benefit to the business.

Facing the future

The third unbundling is already proving to be the great disruptor of our time to traditional businesses, because there is real and lasting value in picking apart the traditional processes and practices that for so long – rightly or wrongly – have underpinned entire industries. While unbundling in this way will force a company to radically transform its organisational structure, which is a difficult and painful undertaking at the best of times, what’s the alternative?

The one certainty in all of this is that those organisations who are making these changes are already pulling ahead, and putting clear water between themselves and the competition. How long can any business really leave it to unbundle their organisation, before it’s too late?